S&P rates Dunkin' revolver, loan B+

Standard & Poor's said it assigned a B- corporate credit rating to Dunkin' Brands Inc. and B+ ratings to the company's proposed $150 million secured revolving credit facility and $700 million secured term loan B. A recovery rating of 1 was assigned to the credit facility.

The outlook is negative.

Proceeds will be used to finance the acquisition of Dunkin' by Bain Capital Partners LLC, The Carlyle Group and Thomas H Lee Partners LP and for general corporate purposes.

The ratings reflect Dunkin's very highly leveraged capital structure, thin cash flow protection measures, narrow product focus and participation in the intensely competitive quick service sector of the restaurant industry. S&P predicted that the investor group will fund $1.5 billion of their $2.4 billion acquisition of Dunkin' with debt and that after the transaction, the company's leverage will be very high at more than 8.5x and cash flow protection measures will be very thin with EBITDA coverage of interest less than 1.5x.

S&P noted, however, that the Dunkin' stores and international business have had generally good performance over the past five years. Same-store sales have been positive in the United States for the past 10 years and have averaged 6.6%. Margins are the highest of S&P's rated restaurant companies because of the high margins on its products and its simple operating systems.

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